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US-CHINA
Spring 2012
US-CHINA
Spring 2012
A CollAborAtive report by:
American Council on renewable energy (ACore)www.acore.org
Lesley Hunter, Primary Editor & ContributorTom Weirich, ContributorLiz Brody, ContributorAnn Jung, Contributor
Chinese renewable energy industries Association (CreiA)www.creia.net
Liu Ying, Editor & ContributorLi Junfeng, Contributor
SeCtioN AUtHorS:
U.S. policyHolland & Hart LLP Ashley K. Wald
U.S. FinanceKaye Scholer LLP Madeleine M.L. Tan
U.S. Market FocusGoldwind Nancy Cook
China policyCovington & Burling, LLP Scott Livingston and William J. Friedman
China FinanceChina Greentech [email protected]
China Market FocusOerlikon SolarChristopher O’Brien
US-CHiNA proGrAM
DuPontStanley Merritt
GCL-Poly EnergyShell Jiang
The US-China Program (USCP) of the American Council On Renewable Energy (ACORE) is dedicated to increasing understanding of the U.S. and Chinese renewable energy markets and fostering public and private sector partnerships between our two countries.
ACORE members who are leading voices in the U.S. and Chinese renewable energy industries are invited to join USCP as partners. Our partners actively shape program direction through consultation with other partners, the USCP strategic advisors, and ACORE staff.
We thank the USCP partners for their special effort toward this Spring 2012 US-China Market Review.
Hudson Clean Energy PartnersMichael Conti
GoldwindColin Mahoney
IBM Rolf Gibbels
Troutman Sanders LLPEdward Epstein
tAble oF CoNteNtS
U.S. MArket review .............................................................................................................................. 7
U.S. Policy: The Anti-Dumping Case Against Chinese Solar Manufacturers and Implications for the U.S. Solar Industry ..................................................................................................... 7
U.S. Finance: Financing Renewable Energy Projects in the U.S.: Case Studies and Opportunities .....11
U.S. Market Focus: Chinese OEMs in the North American Wind Market — the 4P’s revisited ..............14
CHiNA MArket review .........................................................................................................................19
China Policy: Renewable Energy and China’s Five Year Plans ........................................................................19
China Finance: China’s Renewable Energy Financing Bottleneck ................................................................23
China Market Focus: Market Opportunity for Thin Film in China ..................................................................27
US-CHiNA CollAborAtioN UpDAte ................................................................................................... 31
Government Collaboration ........................................................................................................................................31
Private Sector Collaboration ...................................................................................................................................33
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U.S. MArket review
U.S. poliCy: tHe ANti-DUMpiNG CASe AGAiNSt CHiNeSe SolAr MANUFACtUrerS AND iMpliCAtioNS For tHe U.S. SolAr iNDUStry
Ashley k. waldHolland & Hart LLP
SUMMAryIn October of last year, SolarWorld Industries America,
Inc., a U.S. manufacturer of solar cells and panels,
along with six other U.S. solar manufacturers, filed an
anti-dumping petition with the U.S. International Trade
Commission and the U.S. Department of Commerce.
The petition alleges that Chinese panel manufacturers
have been receiving illegal subsidies and are dumping
their product in the U.S. The petitioners argue that
unfair trade practices are driving U.S. manufacturers
out of business and are taking jobs away from American
employees. The case has moved beyond preliminary
investigations by both agencies and will be decided later
this year.
While some commentators have applauded what they
see as a necessary effort to level the trade playing
field with Chinese manufacturers and to protect U.S.
businesses and jobs, others are worried about the
negative effects that this case and a potentially broader
trade dispute with China could have on the U.S. solar and
renewable energy industries, as well as on consumers
and rate-payers. For example, they worry that those
who export to China the very silicon used to make solar
panels and other valuable raw materials will be harmed
by retaliatory actions by the Chinese government, and
that both China and the U.S. could miss the opportunity
to continue to push down the price of solar energy,
which could have a chilling effect on the development of
solar projects around the world.
This article summarizes the status of the pending trade
case and the arguments on both sides of the debate.
iNtroDUCtioNA recent anti-dumping case before the U.S. International
Trade Commission (USITC) and the U.S. Department of
Commerce (USDOC) that could have a significant impact
on the U.S. solar industry (and beyond) has generated
significant interest and discourse. Where one “resides” in
the U.S. solar industry supply chain leads to very different
views on the merits and impact of the trade case.
i. StAtUS oF tHe ANti-DUMpiNG CASeOn October 19, 2011, SolarWorld Industries America,
Inc., a manufacturer of solar cells and panels in the U.S.,1
1 See http://www.solarworld-usa.com/about-solarworld.aspx.
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along with six other (unnamed) U.S. solar manufacturers
that collectively form the Coalition for American Solar
Manufacturing (CASM),2 filed a complaint with the
USDOC and the USITC3 against Chinese manufacturers
of crystalline silicon photovoltaic cells,4 regardless
of whether the cells had been assembled into solar
modules.5 The petitioners allege that Chinese solar
panels are being “dumped” into the U.S. market,
meaning that they are being sold below market or
“normal” value (i.e. the price for which the Chinese
manufacturer is selling its solar panels in domestic
markets).6 The petition also alleges that Chinese
manufacturers have benefitted from unfair subsidies,
loans, and other benefits from the Chinese government
at the expense of the U.S. solar manufacturing industry,
which has closed factories and watched its global market
share diminish.7
Procedurally, the USDOC conducted an initial
investigation and determined on December 13, 2011 that
it would continue to pursue the claim. A preliminary
decision by the USDOC on dumping margins was initially
expected on January 12, 2012 but was postponed until
March 27, 2012. On March 9, 2012, the decision was again
postponed until May 17, 2012.8
Substantively, on January 27, 2012, the USDOC found
that there had been “massive imports of solar cells”9
from Suntech, Trina and other producers or exporters of
Chinese solar cells and panels over a relatively short time
period towards the end of 2011,10 which constitutes what
the USDOC deems as “critical circumstances.” If the USITC
also makes a determination of “critical circumstances”
in its final ruling,11 this finding could allow the USDOC
to impose dumping duties starting at an earlier date
than would otherwise apply.12 On March 20, 2012, the
USDOC addressed the question of countervailing duties
(also called “anti-subsidy duties” because they are
intended to offset the effect of subsidies) by issuing
a preliminary decision that the Chinese government is
subsidizing Chinese solar manufacturers, and ordered
the imposition by U.S. Customs and Border Protection of
tariffs on Chinese manufacturers of 2.90–4.73%.13 Modules,
laminates, and panels produced in a third-country from
cells produced in China are also covered by the decision.
Final tariffs will be decided in June.
The USITC found on December 13, 2011 that there is a
“reasonable indication” that the practices of importers of
Chinese cells are hurting the U.S. solar industry.14 A final
injury determination by the USITC is expected in July. To
date, all of the rulings by the USDOC or USITC have been
in favor of the U.S. manufacturers.
2 See http://www.americansolarmanufacturing.org.3 The USITC’s role is to determine whether there is injury or a threat of injury to a U.S. industry; the USDOC’s role is to determine whether
dumping is taking place and to evaluate the “margin” between the dumped price and normal value.4 Thin film solar cells, other types of solar energy generating equipment, and other forms of solar technology (e.g. solar thermal technology,
etc.) are excluded from this case. 5 Petition for the Imposition of Anti-dumping and Countervailing Duties: Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled into
Modules, from the People’s Republic of China (October 19, 2011), page 1.6 See http://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm. 7 “China Investigation Moves Forward,” Solar Industry Magazine, January 12, 2012. 8 See http://www.forbes.com/sites/greatspeculations/2012/03/09/chinese-solar-firms-get-a-breather-as-import-tariff-ruling-is-delayed. 9 Department of Commerce, International Trade Administration (C-570-980), January 27, 2012.10 The exporters have countered that any surge during that period was in response to developers wanting to qualify for the Section 1603 cash
grant, which expired on December 31, 2011.11 See http://www.greentechmedia.com/articles/read/China-U.S.-Solar-Trade-Claim-Update. 12 The starting date of suspension of liquidation of an item and the posting of a cash deposit or bond is the date of publication of an affirmative
preliminary determination in the Federal Register. In anticipation of high preliminary dumping duties, the importer may deliberately import and stockpile large quantities of a product under investigation in order to avoid the possible payment of anti-dumping duties. Usually, an importer can import a product that is under investigation in a trade case without risk of liability for duties during the period between the date of the publication of the initiation of an investigation and the date of an affirmative preliminary determination. However, as an anti-circumvention measure, the dumping regulations provide for a 90-day retroactive suspension of liquidation under “critical circumstances.” If imposed, the duties would have been applied retroactively to all imports of cells and modules from Chinese exporters that were brought into the U.S. starting on Dec. 3, 2011.
13 See http://thehill.com/blogs/e2-wire/e2-wire/217091-us-imposes-tariffs-on-chinese-solar-imports. 14 See http://www.usitc.gov/secretary/fed_reg_notices/701_731/701_481_notice12132011sgl.pdf.
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ii. iMpliCAtioNS For tHe U.S. AND GlobAl SolAr iNDUStryWhile the focus of the USDOC and USITC investigations
is on the legality of the trade practices, not the
advantages or disadvantages for U.S. companies,15 the
U.S. solar industry has, not surprisingly, reacted strongly
both for and against the trade case.
According to CASM, “[a]t least 12 domestic producers
have undertaken layoffs, gone bankrupt, or closed plants
in all regions of the country over the past two years”16
as a result of what CASM believes to be unfair trade
practices by Chinese manufacturers. CASM further states
that Chinese manufacturers caused:
“market pricing in the United States to collapse in
2011 — with an average worldwide price decline of
40% — despite a growing market for these goods,
[…] [which] has had a devastating impact on the
U.S. solar cell and panel industry, resulting in
shutdowns, layoffs, and bankruptcies throughout
the country.”17
In addition, the well-publicized bankruptcy of Solyndra
(which came on the heels of the bankruptcies of several
other U.S. panel manufacturers) was also blamed by
some, including Energy Secretary Steven Chu, on unfair
competition from Chinese manufacturers.18
Today, three-fifths of the world’s solar panels are
produced in China.19 Approximately 95% of those panels
are exported, many of them to the United States.20 Some
studies indicate, however, that the U.S. solar industry
runs a trade surplus with China, selling equipment and
other exports — including the very silicon used to make
the disputed panels — to Chinese solar companies.21
One group that has been actively speaking out against
the trade case is the Coalition for Affordable Solar
Energy (CASE).22 CASE argues that the imposition of
duties would amount to protectionism, which could
have a negative impact on “more than 5,000 American
solar companies, mostly small businesses, and cost
more than 100,000 American jobs.”23 CASE argues
that should duties be imposed, there would be a loss of
American solar exports (silicon, in particular) and that
this would hamper U.S. manufacturers’ ability to sell
silicon, raw materials, and solar equipment around the
world, including to China. In addition, CASE argues that
if cheaper Chinese solar panels were no longer available
to the U.S. market, the price for solar energy could rise,
reversing the recent trend that has enabled the price of
solar energy to become increasingly competitive with
other technologies, including traditional fuel sources.
Commentators siding with the petitioners in the trade
case retort that if Chinese manufacturers eventually do
force U.S. panel manufacturers out of the market, the
very competition that drove panel prices down by more
than 30% in 2011 would be replaced by a monopoly of
Chinese manufacturers that would push prices back
up, to the detriment of virtually all players in the solar
industry and, ultimately, of all retail consumers of
electricity.24
In anticipation of the imposition of import duties by
the USDOC, many Chinese manufacturers had already
started to move their operations to other countries,
including Taiwan and Korea, where solar cells and panels
can be produced, assembled, and then imported to the
U.S. without being subject to the duties that may result
from this case.25 Price quotes for both trade-compliant
15 See http://www.forbes.com/sites/jenniferkho/2011/12/06/foul-or-fair-u-s-solar-firms-debate-china-solar-subsidies/.16 See http://www.americansolarmanufacturing.org/news-releases/01-30-12-casm-critical-circumstances.htm.17 See http://www.americansolarmanufacturing.org/fact-sheet/. 18 See http://www.csmonitor.com/Business/Latest-News-Wires/2011/0907/Bankruptcy-for-Solyndra.-Is-it-China-s-fault. 19 Arabic Knowledge @ Wharton, “Is China’s Solar Industry Heading for an Eclipse?” December 20, 2011.20 George Haley and Usha Haley, “Bringing Solar Manufacturing Back,” The Hill, February 7, 2012.21 Arabic Knowledge @ Wharton, “Is China’s Solar Industry Heading for an Eclipse?” December 20, 2011.22 See http://coalition4affordablesolar.org/. 23 Ibid.24 See http://www.triplepundit.com/2011/12/chinese-trade-war-solar-panels-killed-solyndra/. 25 It should be noted that these non-Chinese manufacturing operations are not immune from a separate dumping investigation if U.S. petitioners
can present evidence that their sales are also below normal value.
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US-CHINA MARKET REVIEW
and non-trade-compliant modules available for Q2 2012
delivery through the end of the year are rumored to
already be available.26 In anticipation of being charged
with retroactive tariffs, companies like Trina Solar had
already begun to put aside $3.3 million to cover duties
on shipments that were made in December 2011.27
Following the USDOC’s March 20, 2012 decision, a cash
deposit or bond will now be required by U.S. Customs
and Border Protection for all importers of Chinese
solar panels.28
Meanwhile, the next fronts on the apparent “green
energy trade war” with Chinese manufacturers are
taking shape. There is speculation that SolarWorld AG,
the parent of SolarWorld Industries America, Inc. in
Germany, will file a trade complaint against Chinese
manufacturers that sell panels to the European Union.
China, too, has indicated that its Ministry of Commerce
will conduct an investigation as to whether the U.S.
unfairly used subsidies to the detriment of the Chinese
renewable energy industry, including whether the U.S.
dumps silicon in China.29 A petition from a coalition of
U.S. wind power companies filed in late December 2011
seeks an investigation into dumping by Chinese and
Vietnamese manufacturers of utility-scale wind towers.30
Most recently, in March 2012, the U.S., along with
members of the European Union and Japan, threatened
to bring a trade case to the World Trade Organization
based on allegations that China is violating international
trade rules through its restrictions on the export of rare
earth minerals, which are frequently used in various
renewable energy technologies.31
CoNClUSioNThe trade case against Chinese solar manufacturers
has the potential to impact not only the parties that
are directly involved but also the U.S. and global solar
industries as a whole. Trade issues related to the U.S.
solar industry, which already faces challenges from
other policy uncertainties, will persist for some time
and will require close monitoring and clear thought. The
industry’s best and brightest should be encouraged to
seek a prompt, balanced resolution of these issues.
AboUt tHe AUtHorAshley K. Wald is an associate with the Energy and
Infrastructure group at Holland & Hart LLP. Her practice
focuses on renewable energy project development and
finance. Holland & Hart LLP has grown into a full-service
law firm of more than 400 lawyers in 15 offices across
the Rocky Mountain region and in Washington D.C. The
author wishes to thank Tuukka Hess, Ivan Koves, and Mark
Safty for their insight and comments.
26 See http://www.greentechmedia.com/articles/read/solar-trade-war-it-just-doesn’t-matter. 27 See http://www.forbes.com/sites/greatspeculations/2012/03/09/chinese-solar-firms-get-a-breather-as-import-tariff-ruling-is-delayed.28 See http://thehill.com/blogs/e2-wire/e2-wire/217091-us-imposes-tariffs-on-chinese-solar-imports.29 See http://www.nytimes.com/2011/11/26/business/energy-environment/china-looking-into-us-policies-in-renewable-energy-trade.html. 30 On December 29, 2011, a trade case on behalf of the Wind Tower Trade Coalition was filed against Chinese and Vietnamese producers of
utility-scale wind towers. 31 See http://www.reuters.com/article/2012/03/13/us-china-trade-eu-idUSBRE82C0JU20120313.
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U.S. FiNANCe: FiNANCiNG reNewAble eNerGy projeCtS iN tHe U.S.: CASe StUDieS AND opportUNitieS
Madeleine M.l. tanKaye Scholer LLP
overviewThe development and rapid growth of renewable
energy projects in the U.S. have been driven largely by
government incentives, most of which take the form of a
tax credit. Investors in wind farm projects have benefited
from production tax credits (PTCs), and investment tax
credits (ITCs) have offered solar project investors the
ability to claim a certain percentage of their investment
in the capital cost of the project as an immediate credit.
Such tax credits opened up investments in renewable
energy projects to a class of investors known as tax
equity investors. Immediately following the financial
crisis, corporate profits declined significantly and reduced
the number of tax equity investors who could benefit
from such tax credits. To mitigate this, the Obama
administration introduced the 1603 Cash Grant in Lieu
of Tax Credits program to fill the gaps left by tax equity
investors who exited the market. (The program expired
at the end of 2011.) Statistical evidence has shown that
the administration’s cash grant program kept the pace
of renewable energy development in the U.S. active
throughout 2009, 2010, and 2011. With the gradual
stabilization of the U.S. economy and a corresponding
increase in corporate profits, we have witnessed the
return of some tax equity investors and the emergence
of new entrants in the renewable energy market. It is
unclear, however, whether the new entrants will have
sufficient capacity to fill the gap left by the expiration of
the cash grant program. Added to this is the uncertainty
surrounding the extension of the PTC for wind, which is
scheduled to expire at the end of 2012. Additionally, there
are concerns regarding the availability of debt to finance
renewable energy projects in light of the continuing
Eurozone crisis. Despite the uncertainties, the wind
and solar markets are robust, and there is an increasing
interest in tapping the capital markets and investors in the
private placement markets for funding needs.
In January 2012, the American Wind Energy Association
(AWEA) reported that, at the close of 2011, there were
over 100 wind projects under construction across 31
states in the United States and Puerto Rico, representing
a generating capacity of approximately 8,320 megawatts
(MW). With the impending expiration of the PTCs,
there is a great rush in the early part of 2012 to either
break ground on wind projects or complete those that
broke ground in the fourth quarter of 2011. According
to Bloomberg New Energy Finance, the U.S. invested
$55.9 billion in solar development in 2011, up 33% from
the previous year. The pace of solar development is
expected to continue, although it too faces the prospect
of the expiration of ITCs by the end of 2015.
Of note, Terra-Gen Power recently launched a bank-
only $600 million financing scheme to support the
next 300 MW of development at its Alta Wind Project.
BrightSource Energy also announced that it may
seek more than $1 billion in bank debt and bonds
for its concentrating solar project in California. In
addition, Topaz Solar Farms, LLC (Topaz) — a project
company owned by MidAmerican Energy Holdings Co.
(MidAmerican) through its subsidiary MidAmerican
Renewables, LLC — issued $850 million of investment
grade-rated bonds in a private placement for its solar
photovoltaic (PV) farm in California.
topAZ SolAr FArM CASe StUDyThe Topaz transaction demonstrates that there is a
new group of investors who are willing to provide
long-term financing for renewable energy projects. The
550 MW Topaz project is under construction in San
Luis Obispo County, California and will use thin film PV
panels manufactured by First Solar. Topaz’s indirect
parent, MidAmerican, will contribute 40% of equity for
construction costs. Topaz had initially approached the
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market with a $700 million issuance of Series A Notes set
to mature in September 2039 to finance the project. It
was reported that the initial issuance was oversubscribed
and was ultimately enlarged to $850 million. The Series
A Notes were reportedly priced at 5.75% and were issued
at par, with 90% of orders from insurance companies.
Topaz obtained investment-grade ratings for its Notes
from three rating agencies: Fitch (BBB-), S&P (BBB-) and
Moody’s (Baa3).
The Topaz bonds are interesting because of their long,
25-year tenor, maturing just 6 months prior to the
maturity date of the power purchase agreement (PPA)
entered into by Topaz with Pacific Gas & Electric Co.
(PG&E). Such tenor would generally be too long for the
bank loan market. For example, in late 2011, as the credit
markets in Europe began to tighten, an existing long-
term bank loan on a wind project was restructured and
the tenor was reduced from 18 years to 10 years, with
pricing at LIBOR + 275 bps (up from 237.5 bps), with
increased up-front fees. By tapping the capital markets,
Topaz was able to reach a new group of investors,
such as insurance companies, who were able to make
long-term investments. The 25-year PPA, under which
Topaz will sell 100% of its output to PG&E, provides the
project with a defined long-term revenue stream, and its
fixed-price feature mitigates price risk. The strong credit
quality of the purchaser PG&E (rated A3 by Moody’s)
also supported the rating on the bonds.
Other features of the transaction that facilitated Topaz
in obtaining an investment-grade rating on the Notes
included:
Strong support from a credit-worthy sponsor
(MidAmerican is rated BBB+ and had committed to
provide up to 100% of the construction cost if no
debt could be raised, thus ensuring that construction
could be completed even if no Notes were sold);
The extensive experience and good reputation
of First Solar as the panel manufacturer and
of its division, First Solar California, Inc., as the
engineering, procurement, and construction
contractor and operator (EPC Contractor); and
The fact that the PPA would be effective for any
amount of capacity that achieved commercial
operation prior to its guaranteed commercial
operation date.
The transaction demonstrates an increasing interest
in renewable energy projects that provide long-term,
stable revenues from the sale of power to utilities.
SeCUritiZAtioN MArketAnother potential market that renewable energy
sponsors could tap is the securitization market. From
an issuer’s perspective, securitized debt — similar to the
privately placed bonds in deals such as Topaz — has the
potential to provide better pricing and a longer tenor
than bank loans. For investors, securitized debt backed
by revenue payments linked to renewable energy assets
could provide higher yields than the securitized debt of
on-the-run assets. Unlike project bonds like those in the
Topaz case, however, securitization offers the sponsor
the ability to ring-fence the renewable energy assets
into a separate, limited-purpose, debt-issuing entity and
to obtain financing through bonds that are rated higher
than those of the sponsor or the operating company.
Note that in the Topaz transaction, MidAmerican was
rated BBB+, whereas the project bonds were rated BBB-
(and its equivalent of Baa3 by Moody’s).
Previous securitization of renewable energy assets has
involved wind farms, but a securitization of solar assets
has yet to be completed. Even though solar may be
a new asset class, securitizations of operating assets
generally are not new to the rating agencies or investors
in asset-backed securities. There have been several prior
securitizations by operating lessors of aircraft, freight
railcar, and shipping container portfolios, and such
transactions offer guidance as to appropriate structures
for potential issuances of securitized debt in the solar area.
It is important to note however, that there are several
challenges to bringing a successful securitized deal to
market. In addition to risk retention rules under Dodd-
Frank, there could potentially be substantive disclosure
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requirements for various ABS asset classes, and it should
be expected that disclosure of historical performance
data will be a requirement for any such rules. This
could be challenging for most sponsors since long-term
operating data for solar facilities in the U.S. are not yet
available.
AboUt tHe AUtHor Madeleine Tan is a Partner in Kaye Scholer’s Structured
Finance group and is Co-Head of the firm’s Energy
group. Her practice focuses on the development and
financing of alternative energy projects such as wind
farms, utility-scale solar projects, distributed generation
solar installations, and biofuel projects, among other
renewable energy projects, as well as conventional
energy projects. She has advised equity investors,
sponsors and lenders. In addition, she has in-depth
experience with current partnership and leasing
structures employed in the U.S. in financing renewable
energy projects and has advised on cross-border
transactions covering multiple jurisdictions in the U.S.,
Latin America, Europe, Asia and Australia.
Kaye Scholer LLP provides strategic counsel and legal
services to the Fortune 500, middle-market companies and
government entities on a full range of US and international
matters Founded in New York in 1917, Kaye Scholer’s 450
lawyers regularly advise on matters across multiple legal
jurisdictions, including the U.S., U.K., E.U. and China.
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US-CHINA MARKET REVIEW
U.S. MArket FoCUS: CHiNeSe oeMS iN tHe NortH AMeriCAN wiND MArket — tHe 4p’S reviSiteD
Nancy CookGoldwind
projeCt pipeliNeThe U.S. wind industry closed out 2011 with 34.05
megawatts (MW) of commissioned Chinese wind
capacity in nine separate wind farms, representing seven
different OEMs (Figure 1). The development of small-
scale pilot projects has been the preferred entrance
strategy among Chinese OEMs, offering manufacturers
a controlled proving ground for the initial deployment of
their technology in the U.S. market.
Even in challenging market conditions, Chinese OEMs
have still been effective in gaining acceptance among
independent power producers (IPPs) and developers,
taking in over 173 MW of orders during 2011. All 14
of these publicly announced projects, which span
seven U.S. states, are either under development
or construction, with anticipated 2012 commercial
operation dates (COD).
overviewLike many of the world’s wind power markets, the
North American wind energy industry finds itself in flux.
Within the European Union, the once flourishing onshore
market has slowed considerably due in large part to
policy uncertainty and an overall economic malaise. As a
result, much of the European market has been forced to
refocus efforts offshore. Meanwhile, while many expect
the Chinese wind industry to maintain a sustained growth
trajectory, Chinese original equipment manufacturers
(OEMs) are bracing as the government updates its
mechanisms for promoting growth, shifting targets from
installed capacity to annual wind power generation, and
modifying guidance on project finance. And while many
in the North American wind industry remain optimistic,
there is no doubt that the lack of a federal renewable
energy policy and the detrimental effects of natural gas
pricing on long-term power purchase agreements (PPAs)
has caused the U.S. wind market to
experience a significant tightening in
recent years.
Despite these uncertainties,
however, there are more OEMs
in the market than ever. An
environment with fewer projects
and more players requires the
industry to shift its focus to
mastering a new set of “P’s”: project
pipeline, performance, policy, and
people. This paper will examine the
four P’s in relation to Chinese OEMs
in the North American wind market.
FiGUre 1: liSt oF CHiNeSe oeMS witH projeCtS iN tHe U.S.32
Supplier State Capacity (Mw) project Name year online
Huide TX 10 MW Lubbock 2007
New United MN 1.5 MW Prior Lake 2009
Goldwind MN 4.5 MW Uilk 2010
A-Power TX 2.05 MW Spinning Star 2010
Sany TX 10 MW Ralls 2011
Sinovel MA 1.5 MW Delauri 2011
Goldwind IA 1.5 MW Traer 2011
Goldwind IA 1.5 MW Little Cedar 2011
Goldwind IA 1.5 MW Story City 2011
32 IHS Emerging Energy Research On-point: China OEM’s to surpass 150MW of US Wind Installations in 2012. February 27th 2012.
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U.S. MARKET REVIEW
While historically the turbine technology offered by
many of the Chinese OEMs has included smaller MW
models than those offered by the incumbent OEMs, 2011
order activity mirrors the overall industry trend towards
larger rated capacity models, with all Chinese OEMs
offering products larger than 1.5 MW. The benefits of
larger nameplate wind turbines include minimizing crane
and installation resources, reducing visual impact, and
maximizing energy output, especially on pad-constrained
sites. Wind farm developments moving increasingly
towards load centers, along with the abundance of future
re-powering projects and further reductions in top-head
mass through technological innovation, will encourage the
trend towards higher rated capacities.
FiGUre 2: MAp oF CHiNeSe wiND projeCtS SCHeDUleD For operAtioN iN 2012 33
OEM MW PROJECT YEAR COD
GOLDWIND 1.5 LA POSTA 2012
OEM MW PROJECT YEAR COD
GOLDWIND 20 Musselshell 2012
OEM MW PROJECT YEAR COD
UNITED POWER
9 HARBOR WIND
2012
OEM MW PROJECT YEAR COD
GOLDWIND 109.5 SHADY OAKS 2012
OEM MW PROJECT YEAR COD
GOLDWIND 1.5 N. KINGSTOWN GREEN
2012
GOLDWIND 4.5 NARRAGANSETTBAY
2012
OEM MW PROJECT YEAR COD
SINOVEL 3 FAIRHAVEN 2012
SINOVEL 1.5 SCITUATE 2012
SANY 2 FALL RIVER 2012
GOLDWIND 1.5 CAMELOT 2012
OEM MW PROJECT LOCATION YEAR COD
GOLDWIND 1.5 ENEL REDACTED 2012
OEM MW PROJECT YEAR COD
GOLDWIND 10 GEORGIA MOUNTIAN
2012
OEM MW PROJECT YEAR COD
GOLDWIND 3 COOPER FARMS
2012
GOLDWIND 4.5 HAVILAND 2012
33 Content: IHS Emerging Energy Research On-point: China OEM’s to surpass 150MW of US Wind Installations in 2012. Visual: http://www.dsireusa.org/ DSIRE, database of state incentives for renewable energy.
34 IHS Emerging Energy Research On-point: China OEM’s to surpass 150MW of US Wind Installations in 2012. February 27th 2012.
FiGUre 3: wiND projeCt CApACity by CoMMerCiAl operAtioN DAte (CoD)34
Rated Capacity0-5MW
Huide 2.5New United 6-10 MWGoldwind 2.0
Apower 11-99 MW
Sany1.5
SinovelUnited Power
1.0>100MW
2007 2008 2009 2010 2011 2012
Year of COD
16
US-CHINA MARKET REVIEW
perForMANCeAccording to GL Garrad Hassan, a “commercially proven”
turbine is one which has achieved at least 100 turbine-
years of experience in the North American market
operating at an availability level of 95% or greater. While
U.S. banks and developers may not explicitly rely on
the GL Garrad Hassan qualification of “commercially
proven” to determine commercial viability, this level of
operational experience is considered a general minimum
standard. Therefore, multiple commercial deployments
across geographically diverse regions are necessary
not only to satisfy the 100 equivalent turbine years
of operational experience necessary to be deemed
“bankable” but also to showcase the OEM’s ability to
execute on supply chain and operation and maintenance
(O&M) strategies.
Success will lie with those market entrants who are able
to balance the use of proven platforms that satisfy the
aforementioned performance threshold with product
innovation. The U.S. market is particularly thirsty for
technologies which have room to mature and thus
further reduce the overall cost of energy. These products,
both mechanical and process-based, are establishing
a foothold in the mainstream turbine market thanks to
innovative foresight and the buy-in of early adopters.
Some examples of this type of innovation include:
pM Generators: Permanent magnet generator
technology offers enhanced generator efficiency,
especially when performing below rated capacity
at low wind speeds. Further design refinements will
result in the continued reduction of both weight and
cost.
Gearless Solutions: Direct drive technology solves
size and weight issues associated with traditional
drive train systems by drastically reducing torque
density. Furthermore, its mechanical simplicity, due
to a lack of high speed rotational parts, increases
lifetime operating reliability and reduces O&M costs.
increased Hub Height: Taller towers permit the
utilization of larger rotor diameters. The generally
improved wind resources at higher hub heights
and the wider swept area of larger blades result in
improved turbine efficiency and increased annual
energy production.
blade Design: Airfoil design remains one of the most
powerful means to dial up annual energy production
per installed wind turbine generator (WTG).
Continued improvements through weight reduction,
noise abatement, and manufacturing consistency will
result in increasingly efficient technologies.
Condition-based Maintenance: This business-case
approach to wind turbine maintenance integrates
weather forecasting, condition monitoring systems,
traditional supervisory control and data acquisition
(SCADA) data, variable power prices, availability
of labor and spare parts, and overall service
history into a holistic maintenance philosophy. This
strategy utilizes sophisticated planning to balance
maintenance with production in order to maximize
revenue.
With the maturation of these innovations, the
competitiveness of wind compared to other sources of
power generation will continue to improve.
poliCyOf course, support for research and development
aimed at improving the efficiency of both new and
existing technologies will ensure that wind remains a
viable component of any long-term national energy
policy. Both policy-makers and the industry, however,
remain somewhat divided on which policy structures
will best support the industry’s continued, long-term
growth. Certainty is the common thread among policy
considerations, enabling the industry’s supply chain to
make investment decisions that facilitate the expansion
of domestic wind generation.
Most of the incentive schemes that have advanced
the U.S. wind industry to date require periodic re-
authorization. This has resulted in a boom-and-bust
cycle for the financing, development, and installation of
17
U.S. MARKET REVIEW
wind capacity. The production tax credit (PTC) has been
allowed to expire multiple times over the past decade,
significantly disrupting the industry’s ability to plan,
invest, and expand. Moreover, historically, expiration of
the PTC has led to drops in annual MW installations of
between 70 and 100% (Figure 4).
Although improving tax equity markets and the PTC’s
past success augur well for the growth of the wind
industry, weak utility demand and low natural gas prices
continue to place downward pressure on the market.
Certainty, provided on a federal level, remains the most
fundamental market need.
peopleFor a Chinese OEM working to enter the U.S. market, the
task of navigating politically charged, hyper-competitive
waters can be daunting. Job creation remains one of the
most highly energized topics as the U.S. approaches the
2012 presidential elections. According to the American
Wind Energy Association (AWEA), the U.S. wind industry
supported 85,000 and 75,000 direct and indirect jobs
in 2009 and 2010, respectively. With all eyes on future
industry employment rates and wind’s potential to
compete in a non-PTC environment, the extent to which
OEMs work locally becomes critical.
Strong local sourcing partnerships permit new entrants
to increase supply flexibility while contributing positively
to U.S. job creation. According to a Bloomberg New
Energy Finance report published in April of 2011, upon
entering the U.S. market, “Chinese firms will need a team
with U.S. development experience to navigate local
complexities. The U.S. permitting process varies from
state to state and is significantly different from foreign
markets. It is very difficult for foreign developers to
develop large-scale projects in the U.S. without a local
partner or consultant.”36 Additionally, an organically
grown U.S. team allows any foreign entrant to be close to
the customer, minimize response times, and buffer and
manage challenges arising from cultural and time zone
differences.
35 MAKE Consulting Q4/2011 Market Outlook Update36 Bloomberg New Energy Finance April 21st 2011: “Coming to America? New Asian Turbine Exports to the United States”.
-75%10
9
8
7
6
5
4
3
2
1
0
GW
< ’00 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12e ’13e ’13 ’14e ’15e ’16e
-97%-74% -76%
-59%
Past PTC Expirations
WorstCase
Upcoming PTC
Expiration
Post PTC Policy
Uncertainty
Historic installations
Estimated installations
FiGUre 4: projeCteD iMpACt oF ptC expirAtioN oN U.S. wiND iNStAllAtioNS35
18
US-CHINA MARKET REVIEW
lookiNG AHeADIt is highly likely that China will maintain its leadership
position in the global wind market. Chinese OEMs are
poised to become the world leaders in global installed
capacity. While it is unlikely that this will be the case in
North America in the short term, it is clear that Chinese
OEMs are establishing track records of success with an
increasingly sophisticated customer base. Chinese OEMs
will certainly earn a piece of the U.S. market, but the multi-
million dollar question remains: just how big will the pie be?
AboUt GolDwiNDGoldwind, the second largest turbine manufacturer in
the world, is the leader in PMDD technology with over
a decade of operational experience. With operations
across four continents, Goldwind offers a turnkey menu
of services including R&D, project development, turbine
manufacturing, supervision & after-sale service - with
the ability to offer financing solutions through its global
network of Goldwind companies and extensive, global
resources. Goldwind’s headquarters for North and South
America are based in Chicago, Illinois.
Nancy Cook holds the position of Director of Marketing
& Strategy for Goldwind USA Inc. and is responsible for
leading the company’s product & branding strategy. Prior
to joining Goldwind, Nancy spent three and a half years
with Spanish wind turbine manufacturer Gamesa, working
in a similar role.
19
CHiNA MArket review
CHiNA poliCy: reNewAble eNerGy AND CHiNA’S Five yeAr plANS
Scott livingston and william j. Friedman Covington & Burling, LLP
Development of Strategic Emerging Industries (the “SEI
Decision”). The SEI Decision targeted seven strategic
emerging industries to receive priority in national
development: a group which includes “new energy,”
“energy conservation and environmental protection,”
and “clean energy vehicles.”38
China’s focus on encouraging innovation in these
industries was confirmed with the release of the nation’s
12th Five Year Plan (the 12th FYP) in March 2011. The
12th FYP sets national policy for China’s economic and
social goals and strongly influences the decisions of key
regulatory authorities, policymakers, and the business
leaders of China’s powerful State-owned Enterprises
(SOEs).39 Over the course of the recently concluded 11th
FYP, for example, China’s emphasis on clean energy
development resulted in investment of RMB 2 trillion
toward domestic energy efficiency and environmental
protection measures, raising the global competency of
Chinese industries in solar and wind power and helping
Companies looking to invest in China’s renewable energy
sector will be encouraged by the pronounced trend of
government support for reliance on renewable energy.
The selection of “new energy,”37 “energy conservation,”
and “clean energy vehicles” as three of the seven
strategic emerging industries, and their promotion within
the national and industry-specific 12th Five Year Plans
(FYPs), promises a growing market for renewable energy
goods and services in China over the coming decade.
While China’s market for renewable energy is well worth
pursuing due to its unique state-led development model
and its stated desire to create “national champions”
in renewable energy, careful selection of in-country
partners is key.
i. CHiNA’S 12tH Fyp bUilDS oN tHe StrAteGiC eMerGiNG iNDUStrieS iNitiAtiveSIn 2010, China’s State Council released the Decision
of the State Council on Accelerating the Fostering and
37 “New energy” is technically broader than renewable energy (including clean coal and non-conventional gas) but includes a significant renewable energy component.
38 The strategic emerging industries are: new energy, biotechnology, new-generation information technology, high-end equipment manufacturing, advanced materials, clean energy vehicles, and energy-conservation and environmental protection.
39 SOEs are business entities established and supervised by central and local governments. They frequently function as tools for implementing state policy. Estimates indicate eight SOEs account for 70% of revenues in the power sector and are responsible for 90% of power output. US-China Economic and Security Commission. “An Analysis of State-owned Enterprises and State Capitalism in China.” 26 October 2011. http://www.uscc.gov/researchpapers/2011/10_26_11_CapitalTradeSOEStudy.pdf
20
US-CHINA MARKET REVIEW
make China the world’s largest producer of photovoltaic
cells.40 For foreign companies that can structure their
market entry and operations in accordance with the
requirements of the 12th FYP, economic opportunities
are plentiful.
The release of the national 12th FYP furthered the call
for the development of the strategic emerging industries
and included a number of economic goals targeting
renewable energy, including:
A focus on the development of key technological
equipment for efficient energy conservation;
advanced environmental protection; and resource
recycling, products and services
A focus on the development of new-generation
nuclear energy and solar energy utilization;
photovoltaic and photo-thermal power generation;
and wind power technological equipment, intelligent
power grids, and biomass energy
Construction of solar energy power stations with a
total installed capacity of over 5 million kilowatts
(kW), with a focus on Tibet, Inner Mongolia, Gansu,
Ningxia, Qinghai, Xinjiang, and Yunnan
Increased growth in new strategic industries as a
percentage of GDP from 5% in 2010 to 8% by 2015
and 15% by 202041
The 12th FYP is further supplemented by provincial and
industry specific FYPs that specify in greater detail the
general goals enumerated in the national FYP.
In December 2011, The National Energy Administration
(NEA) released China’s 12th Five Year Plan for Energy
Technology (Energy FYP). The Energy FYP seeks to
“provide a technological base for the development of
the strategic emerging industries” by 2015 through
achievement of the following scientific and technical
development objectives:
Assimilate and absorb third generation nuclear
technologies and foster independent intellectual
property rights for nuclear reactor design and
manufacturing of key technology
Improve solar cell efficiency; achieve low cost,
large-scale industrial application; and develop 100
megawatts (MW) multi-type solar energy integration
and grid connection technology with proprietary
intellectual property rights
Master the technology for design and manufacturing
of 6-10 MW wind turbines and key components
On February 24, 2012, the Ministry of Industry and
Information Technology released the 12th Five Year Plan
for the Solar Photovoltaic (PV) Industry (Solar PV FYP),
which contains the following targets:
By 2015, to achieve PV module costs of 7000 RMB/
kW, PV system costs of 1.3 RMB/kW, and power
generation costs of 0.8 RMB/kW
To enhance enterprise innovation ability and ensure
emergence of flagship enterprises with mastery of
advanced core technologies
By 2015, to create an annual production capacity of 5
gigawatts (GW) in leading solar cell enterprises and
ensure that at least one PV solar company surpasses
annual sales revenue of RMB 100 billion; that three to
five PV companies surpass sales revenue of RMB 50
billion; and that three to four PV special equipment
enterprises surpass annual sales revenue of RMB 1
billion.
Announced on December 15, 2012, the 12th Five Year Plan
for Renewable Energy Development will soon be released
by the NEA. Its provisions are expected to identify a
series of targets for renewable energy in China including
the following:
40 US-China Economic and Security Commission. “Backgrounder: China’s 12th Five-Year Plan.” 24 June 2011. http://www.uscc.gov/researchpapers/2011/12th-FiveYearPlan_062811.pdf
41 A more complete discussion of the 12th FYP may be found in the Spring 2011 ACORE US-China Quarterly Market Review.
21
CHINA MARKET REVIEW
Development of a globally competitive renewable
energy industry with use of wind, solar, thermal,
biomass, and other non-fossil energy development to
generate the power equivalent of 480 million tons of
coal by 2015
By 2015, installed wind power capacity of 100 GW
with annual electricity output of 190 billion kilowatt
hours (kWh) (from 62 GW and 80 billion kWh,
respectively, in 2011)
By 2015, installed solar power capacity of 15 million
kW with annual electricity output of 20 billion
kWh (from 2 million kW and nearly 1 billion kWh,
respectively, in 2011)
Reports indicate that China is prepared to invest
RMB 3 ($480 billion) in the clean energy and energy
conservation/environmental protection sectors over the
next five years.
ii. CUrreNt MArket CoNCerNSThe selection of the strategic emerging industries and
choices regarding national development policy set out
in the FYPs must be understood not only as drivers of
China’s state-directed, capitalist economy but also as
part of a domestic self-strengthening narrative. It has
been a near constant during China’s economic rise that
foreign technology should be attracted, studied, and
then deployed domestically for China’s own economic
advantage.
This drive is manifested in China’s quest to develop
domestic “national champions,” who are to be world
leaders in their chosen industries. As stated in the SEI
Decision:
To hold an advantageous position in future
international competition, we must accelerate the
fostering and development of strategic emerging
industries, control the key and core technologies
and related intellectual property rights, and
enhance our capability for independent
development.42
Echoing this sentiment last December, Liu Qi, Deputy
Director of the National Energy Administration, stated
that “in the initial stages of China’s international
renewable energy cooperation, China’s main concern is
access to foreign capital support and the introduction of
international advanced technologies.”43
This remark points to the tremendous opportunity for
foreign investors in the renewable energy sector to
market their technology and services within China. To
the extent that foreign capital support and technology
can further China’s own domestic development goals,
foreign investors can expect to find willing partners
among local businesses. As a result, regulatory approvals
and preferential financing or tax treatment may be more
readily available to spur investments within China.
At the same time, China’s drive to create “national
champions” and its continued insistence on “indigenous
innovation” counsels caution for prospective market
entrants. While potential SOE partners may bring
advantageous relationships that promote joint business
interests, these potential partners’ other interests may
not fully align with those of their international partners.
Companies in many industries, including renewable
energy, have reported misappropriation of intellectual
property by SOEs and their affiliates.44 Indeed,
42 Decision of the State Council on Accelerating the Fostering and Development of Strategic Emerging Industries (October 10, 2010), Article 3.43 Xinhua News. “12th FYP for Renewable Energy Decided - A Leap From Quantity to Quality.” 16 December 2011. http://energy.people.com.cn/
GB/16629061.html (““在可再生能源国际合作初期，中国主要关注的是获得国外资金支持和引进国际先进技术”)44 See, e.g., Bloomberg. “China Corporate Espionage Boom Knocks Wind Out of U.S. Companies” 15 March 2012. http://www.bloomberg.com/
news/2012-03-15/china-corporate-espionage-boom-knocks-wind-out-of-u-s-companies.html
22
US-CHINA MARKET REVIEW
intellectual property rights to innovative technologies
remain a central concern in the U.S.-China bilateral trade
relationship,45 while an unsettled regulatory environment
and lack of government transparency continue to
confront American companies operating in China.46
During the last thirty years of its economic development,
China has perfected a highly efficient model under which
foreign capital and technology is fed and subsumed
into the national economic engine. Development of the
strategic emerging industries is likely to continue this
trend; although, savvy foreign partners may also reap
significant benefits along the way.
AboUt CoviNGtoN & bUrliNG, llpCovington’s Beijing office counsels companies on matters
across a wide range of areas, including market entry and
expansion, licensing of technology and other intellectual
property rights, compliance, and due diligence with
respect to mainland China companies and firms. It also
provides analysis of Chinese government public policy,
legislative and regulatory initiatives affecting industries in
which its clients operate, and related government liaison
work. Its work in Beijing integrates seamlessly with the
advice and expertise of its colleagues around the world,
including its many lawyers with extensive transactional
and senior government experience in our D.C., London,
and Brussels offices.
45 See, e.g., United States International Trade Commission. “China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the U.S. Economy. November 2010. http://www.usitc.gov/publications/332/pub4199.pdf
46 The American Chamber of Commerce in Shanghai. “China Business Report: Executive Summary.” 2012. http://www.amcham-shanghai.org/NR/rdonlyres/E3337DDB-28FD-457D-96B7-2C77E21A2A90/15432/CBR_2011_Exec_Summary.pdf (Full report available to member companies)
23
CHINA MARKET REVIEW
CHiNA FiNANCe: CHiNA’S reNewAble eNerGy FiNANCiNG bottleNeCk
China Greentech initiative (CGti)
installation, and although solar installations are set to
boom, the overall financing environment is unclear.
Government targets will drive increased renewable energy investment through 2020
Using current government targets for onshore
and offshore wind, solar photovoltaics (PV), and
concentrating solar power, CGTI estimates that China
could invest roughly RMB 2 trillion on wind and solar
projects between 2011 and 2020.47 The costs are
weighted towards the period from 2016 to 2020 when
targets for rather costly offshore wind and solar become
more important.48 However, limited funding sources have
become a bottleneck for wind and solar project finance,
potentially slowing the rate of development.
tHe reNewAble eNerGy FiNANCiNG bottleNeCkwind and solar energy projects present unique risks to financiers
The rapid growth of China’s wind and solar renewable
energy projects masks a
complicated financing picture.
Although both wind and solar
capital costs have fallen rapidly
over the past few years, the risks
of these projects remain elevated
compared to conventional energy
projects. Wind and solar projects
have unique risks at each stage,
from planning and construction
to operation. Projects that rely
on Certified Emissions Reduction
(CER) credits have additional
risks related to realizing income
SUMMAryChina’s rapidly growing utility-scale wind and solar
capacity will require trillions of RMB in funding from
2012 to 2020. To finance the country’s ambitious
renewable installation targets, China will need a variety
of financing models.
Given the high cost of renewable energy projects, it is
perhaps not surprising that limited funding sources have
become a bottleneck for project development. Debt,
such as bank loans and bonds, is currently the main
source for wind and solar financing, but good terms are
only available to the largest enterprises or state-owned
enterprises (SOEs), with little project financing needs.
Direct government support for wind and solar includes
tax credits, feed-in tariffs, preferential land-use policies,
and low-interest loans. However, the renewable energy
surcharge is currently insufficient to fund the high cost of
renewable energy projects. In summary, although China
has become the world leader in wind manufacturing and
0
50
100
150
200
250
300
350
400
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Concentrated solar power
Solar PV
O�shore wind
Onshore wind
Note: Calculation based on released wind and solar targets in 2015 and 2020; Unit system cost: onshore wind: RMB 7/W, offshore wind: RMB 16/W, solar PV: RMB 13/W, and 60% of total target is assumed to be utility scale power stations, CSP: RMB 15/W
FiGUre 5: eStiMAteD ANNUAl iNveStMeNt iN Utility-SCAle wiND AND SolAr projeCtS, billioN rMb, 2011–2020
47 CGTI analysis48 These estimates assume constant prices for the four categories of wind and solar power: RMB 7/W for onshore wind, RMB 15/W for offshore
wind, RMB 13/W for solar PV, and RMB 15/W for concentrating solar power.
24
US-CHINA MARKET REVIEW
from this source. Figure 6 illustrates the scope of risks
faced by project lenders and financiers for a typical wind
power project.
loans, bonds, and ipos are the main source of funds for wind and solar to date
“Many people wonder whether financing is still a
bottleneck for wind development in China, like it is
in other countries. The short answer is yes, it’s still a
problem,” said Hisaka Kimura, head of private-sector
infrastructure finance at the Asian Development Bank,
as quoted by Recharge News.49 There are several
reasons why financing channels in China are limited.
First and foremost, China’s renewable energy push has
been led by SOEs, which have large balance sheets,
readily-available connections to local governments,
and the ability to garner low-cost financing from
state-owned banks. Bank loans, bond issuances, and
issuing public equity are the most popular financing
methods. Compared to other countries, China has less
funding from private equity and venture capital (PE/
VC), insurance, and pension funds. China also relies on a
renewable surcharge rather than a system of renewable
energy certificates (RECs).
Bank loans currently provide about 80% of wind and
solar project funding. Among commercial banks active
in providing such loans, China’s Top 4 (Industrial and
Commercial Bank of China, Agricultural Bank of China,
Bank of China, and China Construction Bank) provide the
largest share. Pudong Development Bank, the Hongkong
and Shanghai Banking Corporation (HSBC), and
Standard Chartered have also been active in this market.
In 2010, HSBC offered the first non-recourse project
financing for a wind farm project in Jilin province.50
Commercial loans tend to have shorter terms than those
in developed economies and have interest rates between
6 and 8%.51
Development banks have also provided project funding,
including China Development Bank, the World Bank and
the Asia Development Bank. Such funds are long-term,
low-interest (3–4%) loans open to both SOEs and private
companies.52 The downside of these loans is their limited
FiGUre 6: riSk proFileS For wiND power projeCt leNDerS AND FiNANCierS
Sources: UNEP, e-learning course on Insurance Risk Management for Renewable Energy Project; CGTI analysis
Plan and Construction
Engineering Risk Damage to property caused by technical, engineering or man-made hazards
Wind Volatility
Wind speed below required thresholds
Process Interruption Shut-ins due to unscheduled maintenance or natural catastrophes
CER bankability CER not recognized as bankable revenue
CER Marketability Limited marketability of emission reductions after 2012
PPA default Grid defaulting on contractual obligations under PPA
Contract Bankability Inability to secure bankable PPA with the grid company
Warranty Default Warranty provider failure to meet contractual obligation
Permitting Delays Inability to obtain building permits or other regulatory consents
EPC Non-performance
Contractor inability to deliver to specifications on time and at cost
CER Risk CER delivery shortfall due to regulatory, political and performance risk
Operation CER Realization
Medium Low High
Impact on project economics
CER: Certified Emission Reduction PPA: Power Purchase Agreement EPC: Engineering, Procurement and Construction
49 Stromsta, Karl-Erik, “China’s Big Five squeeze out wind developers,” RECharge News, Jul. 26, 2010, www.rechargenews.com50 HSBC, “Baicheng wind farm project,” www.hsbc.com, accessed on Feb. 1, 201151 CGTI interviews52 Ibid
25
CHINA MARKET REVIEW
availability, as well as long application periods and a
complex project assessment process.
Given recent central government efforts to tighten
credit, developers have turned to the nascent mainland
and Hong Kong bond markets to raise capital. In
mainland China in 2011, state-owned energy companies
issued more than RMB 100 billion in bonds. Terms
ranged from 2 to 10 years, and coupon rates were 4 to
6% depending on maturity. Funds raised went to a mix
of conventional and renewable energy projects, with the
bulk going to conventional energy. Huaneng, Huadian,
and Guodian were the main issuers. The drawback of this
funding method is that, generally, it is only available to
large SOEs.
Recently, Hong Kong has emerged as a popular
alternative to mainland bond issuances. So-called ”dim
sum” bonds in 2011 had coupon rates of 4.5–6.4%.
Primary issuers in the energy category were China
Wind Power and Longyuan. However, compared to the
mainland bond market, the dim sum market is small,
with only RMB 63 billion issued in 2011, of which only
an estimated 6% was for wind and solar development.
Still, the bonds’ high liquidity and low issue cost, plus
the attractiveness they offer to investors anticipating
a continued appreciation in the RMB, may make this
market more attractive in the coming years.53
Equity issuances on the Hong Kong stock exchange
are another important source of funding for renewable
energy development in China. In 2009–2010, four state-
owned wind developers launched initial public offerings:
Guodian’s Longyuan Power, Huaneng Renewable Energy,
China Datang Corporation Renewable Power, and China
Suntien Green Energy. These four SOEs raised over
US$28 billion to meet installation targets; newly released
feed-in tariffs helped their valuations. China Wind Power
and China Power New Energy Development held two
smaller, earlier wind IPOs in Hong Kong. Huadian’s Fuxin
Energy and Guodian Technology & Environment both
plan Hong Kong IPOs for 2012.
Given the predominance of large SOEs in renewable
energy development, it is perhaps not surprising that
the private sector has had less of a role in this area
than it has had in the developed world. For example, in
the U.S., VC and PE firms have invested in renewable
energy development, with many VC firms focusing on
pre-construction projects or early-stage development
activities. Examples of such investments in the U.S.
include Austin Ventures’ $14 million investment in Lincoln
Renewable Energy, a project developer, to conduct
permitting, siting, and interconnection to ready projects
for construction.54 CleanPath Ventures also invested
$800 million in multiple projects,55 and Good Energies
Capital invested $37 million in Agile Energy.56
Examples of types of financing available outside China
that could expand funding channels include funding from
insurance companies, pension funds, and renewable
energy certificates. The following are specific cases
exploring how these channels have been used elsewhere:
In 2011, Munich Re invested €40 million in 40 wind
turbines in Germany.57
Munich Re also co-invested with KKR to purchase a
49% stake in solar power plants owned by T-Solar
Global SA.58
On April 1, 2011, PensionDanmark and PKA, two of
Denmark’s largest pension funds, invested $1 billion
in an offshore wind farm in Denmark.59
53 Law, Fiona, “HSBC Banker: More Renewable Energy Firms Likely to Sell Offshore Yuan Bonds,” The Wall Street Journal, May 4, 2011, www.online.wsj.com
54 Wesoff, Eric, “Solar Project Developer LRE Closes $14M VC Round,” Greentech Solar, Jan. 6, 2011, www.greentechmedia.com55 Roxborough, Shannon, “CleanPath to Pour $800 Million Into Solar Farms,” Energy Boom, Jun. 22, 2011, www.energyboom.com56 Wescoff, Eric, “Solar Developer Agile Energy Gets $24M More in VC Funding,” Greentech Solar, Jun. 10, 2011, www.greentechmedia.com 57 Suess, Oliver, “Munich Re Plans to Invest in Wind, Solar Parks to Boost Returns,” Bloomberg, Jun. 23, 2011, www.bloomberg.com58 Howley, John, “Private Equity and Insurance Firms Bet Big on Renewable Energy,” Green Conduct News, Jul. 22, 2011, www.greenconduct.com59 Quilter, James, “Pension funds invest in Denmark’s biggest offshore project,” Windpower Monthly, Mar. 28, 2011, www.windpowermonthly.com
26
US-CHINA MARKET REVIEW
RECs are another potential channel for funds to meet
renewable targets. RECs are traded, intangible assets
created by the government to ensure utilities meet
renewable energy targets. Each utility is given a
specific target for renewable energy generation, and
these utilities have the opportunity to procure the
power directly through power-purchase agreements or
building utility-owned renewable plants, or they may
purchase RECs from third parties on the open market.
Any excess credits the utility generates can be sold
on secondary markets. RECs have the advantages of
widening participation in renewable energy development
while helping decrease costs through open competition.
On the other hand, RECs can also make renewable
energy development more risky, since the price of RECs
fluctuates over time.
tHe pAtH AHeADChina has embarked on an ambitious plan to develop its
renewable resources, and this plan has already attained
some major successes: China has become the world’s
largest wind power producer, as well as the largest
manufacturer of wind and solar equipment. To reach
the country’s ambitious installation targets for 2015 and
2020, policy makers will have to grapple with whether to
expand the financial playing field and open development
to a wider variety of players—including private domestic
and foreign developers, as well as financial players—or to
continue to rely on SOE banks and energy companies to
construct this vital infrastructure. Although the current
market is constrained, however, some changes, such as
Hong Kong IPO financing and bond issuances for wind
developers, are already underway.
AboUt tHe CHiNA GreeNteCH iNitiAtive Founded in 2008, the China Greentech Initiative (CGTI)
Partner Program has rapidly grown to become the only
China-international collaboration platform of 100+
organizations, focused on identifying, developing and
promoting green technology solutions in China. Partnering
organizations are technology buyers and sellers, service
providers, investors, policy makers and influencers. Built
on two cornerstones, strategic market research and a
community of 500+ decision makers, CGTI provides
participating organizations with three core areas of benefit:
world class market insights that enable better decisions,
meaningful relationships that lead to business opportunities,
and thought leadership and education that position
participants as leaders in China’s greentech markets. Please
visit www.china-greentech.com for more information.
27
CHINA MARKET REVIEW
CHiNA MArket FoCUS: MArket opportUNity For tHiN FilM iN CHiNA
Chris o’brienOerlikon Solar
considerably between the cost of PV energy and the cost
of conventional fossil-fired electricity generation.
reCeNt poliCieS to iNCreASe DoMeStiC MArket For pv iN CHiNAIn addition to becoming the leading region for PV
manufacturing, China has also taken dramatic steps to
increase the domestic market for PV over the past few
years, with a series of national and provincial policies
aimed at accelerating investment into PV projects of all
sizes. The key policy drivers are outlined below.
12th Five yeAr plANThe 12th Five Year Plan, announced in March 2011,
included some notable new commitments for solar
deployment and manufacturing in China. The National
Development and Reform Commission increased the
country’s 2020 cumulative PV deployment target from
20 gigawatts (GW) to 50 GW, and the PV industry was
identified as one of the seven “strategic industries”
outlined in the plan.
UNiFieD FeeD-iN tAriFFIn 2011, the government introduced a Unified Feed-in
Tariff (FiT) to support PV market growth in China. All
grid-connected projects approved after July 1, 2011 are
eligible to receive a FiT of RMB 1 per kilowatt hour (kWh)
($0.16/kWh). Projects located in Tibet are eligible for a
higher FiT of RMB 1.15/kWh. There is no cap on the FiT,
and there is no differentiation between large and small
grid-connected projects.
GolDeN SUN proGrAMThe Golden Sun program was launched in 2009,
intended to support the installation of 500 megawatts
(MW) of solar capacity by 2012. The program did not
provide a FiT but instead provided an up-front subsidy
exeCUtive SUMMAryOver the past several years, China has moved into a
leadership position in the global solar photovoltaics (PV)
industry, with dramatic scale-up and cost reduction in PV
component manufacturing, as well as dramatic scale-up
in the pace of deployment of PV systems in China. The
Chinese government has identified solar PV as one of the
country’s key strategic industries, and it has supported
the growth of the market in China with both ambitious
long-term targets and stable short-term investment
incentives. While the last major PV manufacturing
capacity investment cycle in 2010-11 was focused largely
on wafer-based PV technologies, the next investment
cycle in China will likely be different, with a much greater
share of investment supporting new and expanded
thin film manufacturing capacity in China. Thin film
technology leaders have succeeded in maintaining a low
production cost advantage even as market prices have
fallen rapidly.
iNtroDUCtioNChina has been at the forefront of a set of dynamic
trends that have reshaped the global market for PV over
the past few years. The country has become the leading
world supplier of PV cells and modules and has more
recently become one of the largest end-markets for solar
PV. Traditional wafer-based crystalline PV technology
has dominated recent investments in manufacturing
and installations, but thin film technologies are likely to
play a much more significant role in the next investment
cycle, due to advances by leading global technology
suppliers to drive down costs and improve product
quality. Government policies have played an important
role in accelerating investments in and market growth
for PV in China, and falling prices have narrowed the gap
28
US-CHINA MARKET REVIEW
equal to 50% of the installed cost of the PV systems. The
program also mandated that utilities use the electricity
generated by the PV systems to offset demand.
reMArkAble MArket GrowtH2011 saw remarkable growth in the end market for PV
systems in China, increasing approximately five times
the amount installed in 2010, which was about 500 MW.
The growth was attributable to several factors, including
the newly-introduced policies outlined above, the rapid
decline in the price of PV systems, and the slowing
growth of end-market demand in European markets.
iMpACt oF poliCieS oN tHiN FilM MArketRenewable energy policy in China is evolving in a
promising way for the future development of thin film
end markets in China. The uniform feed-in tariff structure
introduced in 2011 has created a bias toward installations
that deliver the lowest cost energy, which are typically
large-scale, ground-mounted PV projects. This type
of market is well suited to thin film technologies. This
advantage is even greater for systems installed in high-
temperature regions, as thin film technologies have an
advantageous “temperature coefficient”, meaning that
they deliver more energy at high temperatures than
comparably-rated, wafer-based crystalline modules.
iNveStMeNt bUbble oF 2010–11An unprecedented rush of investment into new or
expanded manufacturing capacity for traditional wafer-
based crystalline PV modules led to China’s assuming
global leadership in manufacturing capacity. At the
same time, this investment bubble led to a sharp drop in
prices that compressed margins in 2011 and 2012. Many
of the PV manufacturing plants built in 2010 and 2011 are
struggling to remain competitive today due to the drop
in market prices. Leading wafer-based PV manufacturers
in China are moving quickly to reduce production costs
but have not been able to keep pace with the drop in
prices. Consequently, most are reporting operating
losses in today’s market, resulting in significant operating
losses since Q3 2011.
tHiN FilM iS CoMpetitive CHoiCe For Next iNveStMeNt CyCleLooking ahead to the next investment cycle for PV
manufacturing capacity expansion in China, it is
likely that thin film
manufacturing will play
a much more significant
role, given some thin film
technologies’ inherently
simpler manufacturing
process. Since leading
thin film technology
suppliers have
dramatically improved
the performance and
reliability of thin film
silicon technology,
investors can be
confident that thin
film technology will be
competitive in near- and
medium-term markets.
FiGUre 7: pv eqUipMeNt SpeNDiNG
$ million
12,000
10,000
8,000
6,000
4,000
2,000
015141312111009080706
Historical(“Investment Bubble” for c-Si in 2010–11)
Forecast (New investment cycle beginsin 2012 — opportunity for Thin Film)
Source: SolarBuzz Equipment Quarterly, Jan 2012
29
CHINA MARKET REVIEW
Figure 9 shows a comparison among
reported PV module production costs
for several leading PV companies
during the 4th quarter of 2011. Also
shown is the announced cost of
ownership for the latest turnkey
manufacturing line for thin film silicon
PV from Oerlikon Solar, the market
leader in this segment. Further cost
reductions are expected from both
wafer-based PV manufacturers and thin
film PV manufacturers and technology
suppliers. It is significant to note,
however, that the competitiveness of
the thin film silicon production costs
shown below are based on a production
line with only 140 MW of annual
production capacity, while the costs
for the more mature wafer-based suppliers are based on
production volumes that are in many cases more than 10
times higher.
iNCreASiNG tHiN FilM r&D AND iNNovAtioN iN CHiNAIn addition to China’s growing leadership in PV
manufacturing and its fast-growing domestic market for
PV installations, companies in China are also investing
heavily to accelerate PV technology innovation to further
decrease costs and increase PV performance. While
most of the recent research activities have focused on
wafer-based crystalline PV technologies, there is also
increasing interest and investment in China for thin film
research and development (R&D). As an example of this
shift, in December 2011 the International Cooperation
Center of the China Renewable Energy Society (CRES)
announced a Memorandum of Understanding (MOU)
with Oerlikon Solar to collaborate on thin film silicon
technology in China. Announced in Beijing, this strategic
partnership marked the start of a joint effort to capitalize
FiGUre 8: ebit MArGiN For SeverAl leADiNG pv MANUFACtUrerS
Data sources: Q4 earnings releases, Oerlikon Solar estimates
Q3 11 Q2 11 Q1 11 Q4 10 Q3 10
Tier 1 c-Si
Tier 1 c-Si
Q4 11
Tier 1 c-Si
Tier 1 TF
~$1.75 ~$1.50 ~$1.25 ~$1.05 Ave c-Si Module Price
30%
20%
10%
0%
-10%
-20%
-30%
Data sources: Q4 earnings releases, Oerlikon Solar estimates
FiGUre 9: pv MoDUle proDUCtioN CoStS For leADiNG MANUFACtUrerS
$0.72/W
$0.13/W
Mfr ATier 1 c-SiQ4 2011
Mfr BTier 1 c-SiQ4 2011
Mfr CTier 1 c-SiQ4 2011
Mfr DTier 1 TFQ4 2011
Mfr DTier 1 TF
2012E
TurnkeyTF Si (Est)
Production Cost$/Wp
$0.65/W
$0.46/W
$0.19/W
$0.78/W
$0.67/W
$0.11/W
$0.85/W
E�ciency Penalty1.20
1.00
0.80
0.60
0.40
0.20
0.00
$1.17/W$1.04/W
$0.94/W
on the benefits of the Oerlikon’s thin film silicon solar
technology with an emphasis on China, including:
Research on thin film solar power electricity
generation
Support for and participation in demonstration
projects undertaken by the International Cooperation
Center for CRES government policy advisory
Organization of forums such as the 2012 “Conference
on Thin Film Solar Power Cell Technology”
CoNClUSioNChina has declared and demonstrated a commitment to
develop solar PV as a strategic industry domestically. At
the same time, the country has increased deployment
of PV to meet an increasing portion of its fast-growing
demand for electricity. The rapid PV industry growth
and widespread adoption of solar PV in China has been
remarkable, and the country’s long-term commitment
to solar PV, as evidenced by the increased 2020 targets
included in the 12th Five Year Plan, provide a level of
market certainty that will continue to attract new
investment. Investment in new manufacturing capacity
is recovering from an “investment bubble” in 2010-11
that was driven primarily by large-scale wafer-based
PV manufacturing plants in China. The next investment
cycle will be different, however, and low-cost thin
film technologies will comprise a much larger share
of new manufacturing investment in China. Ongoing
innovation in thin film PV technologies has succeeded
in maintaining competitively low production costs for
thin film silicon and certain other thin film technologies.
Finally, an increasing portion of thin film R&D will take
place in China, evidenced by agreements such as the
recent MOU between China’s CRES and Oerlikon Solar.
AboUt tHe AUtHorChris O’Brien is a member of the Advisory Board for
ACORE and is the Head of Market Development for
Oerlikon Solar. Oerlikon Solar is a global supplier of
advanced manufacturing equipment and manufacturing
lines for low-cost thin film silicon solar PV modules. Chris
has held senior management positions with leading solar
PV and other energy companies and trade associations
for over 20 years. He holds an engineering degree from
Dartmouth College and an MBA from Stanford University.
31
US-CHiNA CollAborAtioN UpDAte
GoverNMeNt CollAborAtioN
for both countries and the rest of the world…… We are
hopeful that you and Vice President Xi will discuss the
mutual interests that America and China have in regard
to expanding the use of solar technology.” The CEOs
represent companies from 19 states and are engaged
in all segments of the solar industry, from polysilicon
manufacturing to solar installations.60 At a February 14,
2012 luncheon for Chinese Vice President Xi Jinping,
hosted by Secretary of State Hillary Clinton and Vice
President Joseph Biden, Secretary Clinton stated that
cooperation between the U.S. and China is “imperative
to addressing the many vexing challenges we face, from
countering proliferation, to addressing climate change, to
promoting global economic security.”61 Vice President Xi
echoed this sentiment at a meeting at the U.S. Chamber
of Commerce, before American and Chinese CEOs: “The
economic agendas of the two countries have a lot to offer
to each other, and there is space for our cooperation in
energy, environmental protection, biomedicine, advanced
manufacturing and infrastructure.”62 Xi had stated earlier
at the same White House luncheon that communication
and cooperation on the environment could serve to
Los Angeles Mayor Antonio Villaraigosa (left) and Chinese Vice President Xi Jinping (right) visit the Port of Los Angeles on February 17. At the Port, Vice President Xi met with employees of China Shipping, which is undertaking a major expansion project of their terminal within the Port of Los Angeles. Image Courtesy LA Mayor’s Office of Economic and Business Policy.
xi jiNpiNG’S viSit to tHe U.S.As the United States and China look to the green
economy to drive growth in the coming years, both
direct cooperation and diplomacy aimed at fostering
fair competition will be crucial. As 45 CEOs stated in
a collective letter to President Obama on February
13, 2012 “We are at a crucial time in the development
and growth of the solar industry with broad benefits
60 “US Solar CEOs Call on Obama to Negotiate with China,” Solar Novus Today, February 13, 2012, accessed March 21, 2012, http://www.solarnovus.com/index.php?option=com_content&view=article&id=4328:us-solar-ceos-call-on.
61 “Vice President Biden and Secretary Clinton Host Chinese Vice President Xi,” DipNote Blog, February 15, 2012, accessed March 20, 2012, http://blogs.state.gov/index.php/site/entry/clinton_china_vp.
62 “Remarks by Vice President Biden and Chinese Vice President Xi to U.S. and China CEOs,” The White House, Office of the Vice President, February 14, 2012, accessed March 20, 2012, http://www.whitehouse.gov/the-press-office/2012/02/14/remarks-vice-president-biden-and-chinese-vice-president-xi-us-and-china-.
32
US-CHINA MARKET REVIEW
“cement the basis of cooperation and broaden bilateral
ties.”63 There is also growing awareness of the need for
energy policies in both countries to complement each
other rather than to clash, as the global community turns
increasingly to China and the U.S. to shape the dialogue
on international climate change.
The China Shipping Group’s Los Angeles terminal, one
of the final stops on Xi’s tour, provides an example of
this kind of cooperation. During Xi’s visit to the terminal
on February 17, 2012, California Governor Jerry Brown
and Los Angeles Mayor Antonio Villaraigosa praised the
terminal’s success in the fields of both energy efficiency
and environmental protection, and Xi noted its efficient
use of propane as a clean alternative.64 Finally, the State
Department used the occasion of Xi’s visit to expand
the U.S.-China EcoPartnerships Program, which focuses
on strengthening subnational environmental ties in the
public, private, and civic sectors. At the city level, Hefei,
the capital of Anhui Province, and Columbus, Ohio are
the latest addition to the program, bringing the total
number of EcoPartnerships to 15.65
reSeArCH AND DevelopMeNtFinally, even as recent years have seen focus shift
away from research, development, and demonstration
(RD&D), research institutes in both the U.S. and China
have signed agreements on several cutting-edge
projects this year. In February 2012, the National Energy
Administration and National Development and Reform
Commission established China’s first renewable energy
think tank, the China National Renewable Energy Center
(CNREC). CNREC has named clean energy scientists,
experts, and analysts from several countries to its
consulting committee. Dr. David Kline, of the Strategic
Energy Analysis Center at the National Renewable
Energy Laboratory, represents the United States on the
committee.66 To date, the Center has already released
two studies on biogas and the market size for waste-to-
energy (WTE) technologies in China. As China grapples
with issues arising from mechanized agriculture and
urban waste disposal, biogas and WTE represent a
potentially fruitful avenue for Chinese renewables.
On March 19, 2012, the School of Energy Research at
Xiamen University in Fujian Province announced a
partnership with several international firms, including
the Department of Energy’s Lawrence Berkeley National
Laboratory (LBNL), to build and research direct-current
microgrids on Xiamen University’s campus. The research
project could revolutionize the way building energy
use in China is created, stored, and managed, with the
potential to introduce renewable technologies onsite
and mobile and online energy management software
systems.67 The project is part of LBNL’s DC Power for
Data Centers of the Future initiative.68
Two utility companies, Duke Energy and China’s Huaneng
Energy Group, have also received funds from the U.S.-
China Clean Energy Research Center (CERC) to pursue
a 3-year project researching low-cost carbon capture
and storage technologies.69 The U.S.-China Clean
Energy Research Center was established in 2009 by U.S.
President Barack Obama and China’s President Hu Jintao
in order to support joint research and development on
clean energy technology.70
63 “Chinese, US presidents hold talk on ties,” Global Times, February 15, 2012, accessed March 20, 2012, http://www.globaltimes.cn/NEWS/tabid/99/ID/695980/Chinese-US-vice-presidents-hold-talks-on-ties.aspx.
64 “Xi Jinping Inspects China Shipping Group’s Los Angeles Terminal,” Ministry of Foreign Affairs of the People’s Republic of China, February 17, 2012, accessed March 20, 2012, http://www.fmprc.gov.cn/eng/zxxx/t906991.htm.
65 “Expansion of U.S.-China EcoPartnerships Program,” United States Department of State Media Note, Office of the Spokesperson, February 15, 2012, accessed March 20, 2012, http://www.state.gov/r/pa/prs/ps/2012/02/184027.htm.
66 Juan, Du, “China sets up first renewable-energy think tank,” China Daily, February 24, 2012, accessed March 21, 2012, http://www.chinadaily.com.cn/bizchina/2012-02/24/content_14686084.htm.
67 “Xiamen University Partners with Leading Technology and Energy Providers to Build China’s First Direct-Current Microgrid,” Marketwatch, The Wall Street Journal, March 19, 2012, accessed March 20, 2012, http://www.marketwatch.com/story/xiamen-university-partners-with-leading-technology-and-energy-providers-to-build-chinas-first-direct-current-microgrid-2012-03-19?reflink=MW_news_stmp.
68 See http://dcdatacenters.com/69 “Duke Energy & China Huaneng sign CCS research agreement,” Carbon Capture Journal, February 18, 2012, accessed March 20, 2012,
http://www.carboncapturejournal.com/displaynews.php?NewsID=898.70 See http://www.us-china-cerc.org/
33
US-CHINA COLLABORATION UPDATE
privAte SeCtor CollAborAtioN
ACqUiSitioNSince December 2011, State Grid, China’s state-owned
utility company, has been in talks to acquire an 80%
stake in global power producer AES Corp’s U.S. wind
energy assets, representing approximately 1.1 gigawatts
(GW) of capacity. The assets are estimated to be worth
$1.65 billion. State Grid has been actively expanding
overseas, purchasing controlling stakes in utility
companies in Portugal and Brazil. China Investment
Corporation, China’s sovereign wealth fund, already
holds a 15% stake in AES, meaning the deal could face
political hurdles in the U.S.72
iNveStMeNtIn addition to its joint venture with NRG Solar, China’s
GCL-Poly released a joint statement with Bank of
America Merrill Lynch (BOAML) in February 2012 stating
that it plans to use the bank as a long-term source
of funding for its U.S. projects. At present, BOAML
is financing the construction of a 15-site, 5 MW solar
installation in California by GCL Solar. This is an example
of GCL Solar’s continuing efforts to establish a firm
presence as a photovoltaic (PV) developer both in China
and in the U.S.73
American Jianye Greentech Holdings, Ltd., announced
on March 7, 2012 that it will invest in Gulf Coast Energy
Inc. (GCE) to build a blending factory for biofuels in
Alabama. The factory will produce and distribute 30
million gallons of alcohol-based fuel per year, and this
new partnership will build on GCE’s wood waste-to-
ethanol demonstrated technology. American Jianye
plans to use this project as a stepping stone to accelerate
business development in the United States.74
In the beginning of 2012, U.S. and Chinese companies
signed agreements to build large-scale renewable projects,
improve solar panel construction, and develop electric
vehicles. While large and state-owned Chinese companies
continued their recent trend of investing in overseas
energy markets, U.S. companies welcomed investment as
an opportunity to establish research projects.
joiNt veNtUreSMurphy-Brown, a subsidiary of Smithfield Foods, and
Beijing Helee Bio-Energy (HELEE), a subsidiary of
DQY Agriculture Technology Co., Ltd., announced the
formation of a joint biogas venture in February 2012.
The project will adopt core technologies from HELEE
and is estimated to produce 3.5 million cubic meters of
methane annually, with a power generating capacity of
1 megawatt (MW). The project will not only produce 7
million kilowatt hours (kWh) of electricity per year but
will also cut 42,000 tons of CO2 emissions annually.71
Liansheng Miao, chairman and chief executive officer of Yingli (left) and Dave Miller, president of DuPont Electronics & Communications (right), sign a $100 million strategic agreement for solar materials and technology collaboration. Image courtesy of DuPont.
71 “China and US Firms Sign Biofuel Deal,” The Bioenergy Site, February 20, 2012, accessed March 21, 2010, http://www.thebioenergysite.com/news/10496/china-and-us-firms-sign-biofuel-deal.
72 Xu, Wan and Don Durfee, “China’s State Grid in talks to Buy AES’ U.S. wind assets: sources,” Reuters, February 27, 2012, accessed March 20, 2012, http://finance.yahoo.com/news/China-State-Grid-talks-buy-rb-917004133.html.
73 Lee, Andrew, “Bank of America to be ‘long-term funder’ of China’s GCL-Poly,” RECHARGE, February 15, 2012, accessed March 21, 2012, http://www.rechargenews.com/business_area/finance/article303458.ece.
74 Aylott, Chris, “China Biofuel Company Invests in Alabama,” Emerging Money, March 8, 2012, accessed March 21, 2012, http://emergingmoney.com/china/china-biofuel-company-invests-in-alabama-ajgh/.
34
US-CHINA MARKET REVIEW
bUSiNeSSGE announced in late February 2012 that it will provide
its ecomagination-qualified Jenbacher gas engines
to power China’s largest landfill gas (LFG) power
generation project. The LFG project is owned by
Laogang Renewable Energy Co., a joint venture formed
by Veolia and the Shanghai Environmental Group. This
project will support China’s 12th Five-Year Plan — in
which the country has pledged to invest more than
RMB 260 billion in the waste treatment industry,
including waste-to-energy initiatives — and also
improve the living conditions in local areas by reducing
greenhouse gas emissions and producing energy.75
reCeNt U.S.-CHiNA privAte SeCtor CollAborAtioN
U.S. FirM CHiNeSe FirM CollAborAtioN
Dupont Corp. Suntech Power Holdings Co., Ltd.
The two companies will make improvements in backsheets construction and study how this affects longevity and power outputs of solar modules. DuPont has also promised to help Suntech improve its supply chain, and the companies have pursued “co-marketing” to help educate customers and partners down the value chain.76
Hudson Clean Energy Partners
GSE Investment Corp. Hudson acquired a minority interest in the China-based GSE Investment Corporation, a premier operator of solid waste-to-energy and tap water/wastewater treatment projects. The acquisition, which is Hudson’s first investment in China, will allow GSEI to launch several expansion and greenfield projects and accelerate its near-term growth.77
Premier Power Renewable Energy Inc.
Chaori Solar USA, LLC (Shanghai Chaori Solar Energy Science & Technology Co.)
A $27.6 million contract announced in February 2012 between Premier and investment-focused Chaori Solar USA will build three high-performance, utility-scale solar power plants in New Jersey. Premier will provide engineering, procurement, and construction services using panels from San Jose-based SunPerfect Solar Inc.78
DuPont Corp. Yingli Green Energy Holding Co.
Yingli Green Energy Holding Co. will purchase $100 million of solar material from DuPont Co., including photovoltaic metallization pastes and protective backsheet films.79
75 “GE Gas Engine Technology to Power China’s Largest Landfill Gas Project,” Power Engineering, February 25, 2012, accessed March 21, 2012, http://www.power-eng.com/news/2012/02/26/ge-gas-engine-technology-to-power-china-s-largest-landfill-gas-project.html.
76 Montgomery, James, “Suntech, DuPont to Collab on Solar Backsheets, Supply Chain,” RenewableEnergyWorld.com, February 3, 2012, accessed March 21, 2012, http://www.renewableenergyworld.com/rea/news/article/2012/02/suntech-dupont-to-collab-on-solar-backsheets-supply-chain.
77 “Hudson Clean Energy Partners Acquires Minority Interest in China-Based GSE Investment Corporation; GSEI Leads China’s Fast-Growing Environmental Protection Industry,” Market Watch, The Wall Street Journal, February 15, 2012, accessed March 21, 2012, http://www.marketwatch.com/story/hudson-clean-energy-partners-acquires-minority-interest-in-china-based-gse-investment-corporation-2012-02-15.
78 Glover, Mark, “Premier Power Lands New Jersey Project,” The Sacramento Bee, March 9, 2012, accessed March 21, 2012, http://www.sacbee.com/2012/03/09/4323674/premier-power-lands-new-jersey.html.
79 Goossens, Ehren, “China’s Yingli to Buy $100 Million in Solar Products From Dupont,” Bloomberg Businessweek, February 14, 2012, accessed March 21, 2012, http://www.businessweek.com/news/2012-02-14/china-s-yingli-to-buy-100-million-in-solar-products-from-dupont.html.
35
US-CHINA COLLABORATION UPDATE
80 Goossens, Ehren, “LDK Solar Gets $64 Million in China Funding for U.S. Projects,” Bloomberg New Energy Finance, January 5, 2012, Online, Accessed: March 20, 2012, http://bnef.com/News/51330
81 Tournemille, Harry, “Goldwind Acquires Montana’s Musselshell Wind Project from Volkswind,” Energy Boom, January 19, 2012, Online, Accessed: March 20, 2012, http://www.energyboom.com/wind/goldwind-acquires-montanas-musselshell-wind-project-volkswind
82 “GCL-Poly Energy and NRG Solar Form Joint Venture,” Solar Buzz, Solar Market Research and Analysis, February 6, 2012, accessed March 21, 2012, http://www.solarbuzz.com/node/3687.
83 “Satcon, Great Wall Computer Announce Strategic Sales and Manufacturing Partnership to Expand Satcon’s Leadership Position in China’s Utility Scale Solar Market,” Business Wire, February 7, 2012, accessed March 21, 2012, http://www.businesswire.com/news/home/20120207005553/en/Satcon-Great-Wall-Computer-Announce-Strategic-Sales.
84 Robinson-Avila, Kevin, “Emcore’s solar joint venture in China starts production,” New Mexico Business Weekly, March 1, 2012, accessed March 21, 2012, http://www.bizjournals.com/albuquerque/news/2012/03/01/emcores-solar-joint-venture-in-china.html.
85 “ONYX signs MOU to Acquire 25% of ‘Plug-N-Play’ Co-Developer,” Business Wire, January 25, 2012, Online, Available: http://www.businesswire.com/news/home/20120127005192/en/ONYX-Signs-MOU-Acquire-25-
Solar Power, Inc. (SPI)
China Development Bank Corp. (CDB)
SPI, which is 70%-owned by LDK Solar Co., announced in January 2012 that it had received $44 million from the state-owned CDB. The funding is slated for projects in New Jersey that the company is building for U.S. developer KDC Solar, LLC. LDK also received $20 million in financing from the CDB for two projects that SPI will develop and build in California.80
NorthWestern Energy Corp.
Goldwind USA Inc. (Goldwind Science & Technology Co., Ltd.)
In January 2012, Goldwind USA acquired the 20 MW Musselshell Wind Project in Montana from Volkswind USA. The project allows Goldwind to increase market penetration of its permanent magnetic drive technology in the U.S. NorthWestern Energy has arranged construction, power purchase, and interconnection agreements with Goldwind.81
NRG Solar, LLC (NRG Energy Inc.)
GCL-Poly Energy Holdings Ltd.
GCL-Poly Energy and NRG Solar announced the formation of Sunora Energy Solutions 1, LLC, in early February 2012. Further information on this joint venture has yet to be disclosed. Each of the shareholders hopes to substantially enhance financial returns by combining GCL-Poly’s performance-optimized PV system equipment and NRG’s proprietary advanced racking.82
Satcon Technology Corp.
China Great Wall Computer Group Co., Ltd. (GWCC) (China Electronics Corp.)
Satcon announced in February 2012 that it had signed a five-year agreement with GWCC. The agreement covers commercial sales, as well as a marketing and distribution relationship in the Chinese market. The deal will allow Satcon to bring its utility-scale inverter technology to an estimated 14 GW of utility-scale projects under development in China.83
Emcore Corp. San’an Optoelectronics Co., Ltd.
In February 2012, Suncore Photovoltaics Co., Ltd., a joint venture between Emcore and San’an, broke ground on its Huainan factory, which will deliver an estimated 200 MW of solar PV components and subsystems in its first phase. The capacity of the components is expected to reach 1 GW annually over the next five years.84
Onyx Service & Solutions Inc.
Optimum Solar Corp. In January 2012, Onyx announced that it had signed a Memorandum of Understanding with Optimum Solar. Onyx plans to acquire 25% of Optimum, which co-developed the “Plug-N-Play” all-in-one solar panel system. Onyx hopes to gain engineering and manufacturing expertise through the acquisition.85
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US-CHINA MARKET REVIEW